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Brattle Group: New York's proposed nuke credits will save consumers $1B a year

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Essential Energy Insights - February 2021

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


Brattle Group: New York's proposed nuke credits will save consumers $1B a year

Anew Brattle Group analysis of a proposal to subsidize New York's upstatenuclear power plants concluded it will save consumers about $1 billion a yearon average as energy market prices are expected to increase, thereby loweringthe zero-emissions credits paid to nuclear plants.

Inits assessment of a July 8 proposal by the staff of the New York Public ServiceCommission, The Brattle Group found that the proposed nuclear subsidy payments"appear to add to the price that consumers will pay for power," but "absentthe upstate nuclear plants, power prices would be significantly higher, ashigher-cost resources would be called upon to make up the lost powerproduction."

Accordingto The Brattle Group, without New York's upstate nuclear generation,electricity costs would average $1.7 billion more every year through 2024 andwould increase rates by more than 1 cent per kilowatt-hour, or about 7.2%higher on average. Residential customers would pay 5.8% more while commercialand industrial customers would pay 8.2% more on average, the analysis said.

Whilethe cap on the cost of zero-emission credits, or ZECs, is expected to rise inlater years, The Brattle Group said the caps will always remain belowelectricity cost savings. "Thus staff's proposed program to preserve theupstate nuclear plants would actually save consumers money on powercosts," the analysis said. TheBrattle Group estimated savings will exceed the cap by about $1 billion a yearon average.

TheZEC program is one part of New York Gov. Andrew Cuomo's proposed clean energystandard to subsidize renewable energy and three existing upstate nuclearplants to ensure New York meets its goals of cutting carbon dioxide by 40% from1990 levels and generate 50% of its electricity from renewable energy by 2030.According to The Brattle Group, the preservation of the , , and nuclearplants in upstate New York would avoid about 15 million tons of carbon dioxideemissions each year.

Theprice for the proposed ZECs are set for the first two years at the U.S.government's estimate of the social cost of carbon, or total impact on energy costs,public health, property and agriculture, and offset by the carbon price in themulti-state Regional Greenhouse Green Initiative. Under the proposal, creditsdecrease if electricity market prices rise above the baseline of $39/MWh.

Theestimated payments for an expected 27.6 million MWh of emission-free nucleargeneration could be approximately $482 million annually the first two yearsstarting in April 2017 at a rate of $17.48/MWh before gradually increasing toalmost $805 million annually in the final two years at a rate of $29.15/MWh. Intotal, the payments could, if the market does not improve, total about$7.6 billion through2029, but the PSC staff also expects increased natural gas prices to raiseelectricity prices in coming years and, in turn, reduce ZEC payments.

AnApril 8 cost-benefitanalysis report by PSC staff had originally estimated it would cost only $270million to keep New York's upstate nuclear plants online through 2030 at a netbenefit of $2.8 billion. The same report estimated it would cost a total of$3.35 billion to subsidize new and existing renewables at a net benefit of$1.59 billion. An April 18analysis by The Brattle Group said the $270 million in estimated nuclear costswould be exceeded in savings of $10 billion through 2023.

Manyenvironmental, pro-renewables and other groups, including the Alliance for aGreen Economy, New York Public Interest Research Group, and Physicians forSocial Responsibility, do not support the proposal. In a July 12 letter, thegroups requested an extension to the "paltry" 10-day comment period,which ends July 18.

"Thereare cheaper, fairer and less costly ways of meeting the laudable goals ofeconomic development and carbon reduction," the groups said in theirletter. "Under this new proposal, New York will spend more than twice asmuch on nuclear subsidies as it will for renewable energy under the Clean EnergyStandard. This is an opportunity cost and a waste of money that New Yorkerscannot afford."